Arnold Kling  

Top-Down Health Care Reform

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From the White House.


One key improvement, for example, is eliminating the Nebraska FMAP provision and providing significant additional Federal financing to all States for the expansion of Medicaid. For America's seniors, the proposal completely closes the Medicare prescription drug "donut hole" coverage gap. It strengthens the Senate bill's provisions that make insurance affordable for individuals and families, while also strengthening the provisions to fight fraud, waste, and abuse in Medicare and Medicaid to save taxpayer dollars. The threshold for the excise tax on the most expensive health plans will be raised from $23,000 for a family plan to $27,500 and will start in 2018 for all such plans. And another important idea included is improving insurance protections for consumers and creating a new Health Insurance Rate Authority to review and rein in unreasonable rate increases and other unfair practices of insurance plans.

So, the main thing is to heavily regulate the insurance industry from Washington. No sign that the President is reaching out to those of us who disagree with top-down regulation and centralized power.
The New York Times reports on a controversy about the Dartmouth research which showed that high health care spending was wasteful. New research differs. The critic is quoted:

"We are about to embark on a huge transformation of our health care system," Dr. Bach said. "If we start with a bunch of flawed measures, it will be as devastating as putting in the wrong coordinates before a moon shot."

Top-down health care reform is like a moon shot. You have one chance to get it right. Instead, trial-and-error market evolution is less risky. If people make their own decisions about medical procedures, then the mistakes they make will not be so heavily dependent on the Dartmouth researchers and their opponents.

[update: I have to say that the Republican responses on health care, as solicited by the New York Times, did not impress. Although this is too long for the Times, it provides helpful background.

Once again, here is my bottom line for the health summit.]


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COMMENTS (3 to date)
Thomas Sewell writes:

I'm just going off of media reports at this point, but it sounds like a key component of the plan amounts to price controls on health insurance. I'm still trying to work out how that will manifest itself in the inevitable in shortages of health insurance.

Will insurance companies just start leaving markets? Will they start refusing applications much more? What do you think?

Dan Weber writes:

My two-sentence compromise would be:

1. For Republicans: Medicare's total budget is strictly limited. (Say, $2000 per US citizen in 2010 dollars.)

2. For Democrats: It is politically isolated so you can run it however you want. (You have no legislative ability to, say, revoke patents, but you can also drive as hard a bargain as you want to with providers just on basis of your market size.)

#1 calls the Republican bluff, at least before the Summer of 2009 (when they suddenly decided that limitations of Medicare were now a grievous sin), because it strictly limits government spending. All the people claiming to have re-found fiscal conservatism cannot object.

#2 is calling the Democrats' bluff. "You think you can run a national health care service? Okay, here's a budget that most other countries do fine with. Have at it."

mark writes:

Many states already directly regulate the amount that insurance companies can charge for premiums. So for those states the Obama proposal is just surplusage. For those who don't, why isn't that a matter for the states themselves to deal with? If Californians want to have a panel regulate insurers' charges, they can certainly pursue that through their legislature or through, in California's case, through ballot propositions. If you are a voter in a state that already regulates this, you have to wonder why you should have to pay taxes to support a bureaucracy to regulate some other state's transactions. If you like living in an unregulated state, then you don't like this either. So the only people who might like this proposal are those who like to meddle in others' affairs or those who are too politically ineffective to get their preferences expressed by their particular state.

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